Where to begin with bookkeeping?

<p>I haven't started any record keeping yet, as I just "opened", so I'm trying to be prepared for when I have to. I am overwhelmed with the information I've found so far, and I will be leaving as much work to a CPA as possible. I know I have to keep track of expenses and profits, for example, but what else? <br>

I just don't know where to start, and what order to proceed in. I should see an accountant, but do I need to have all my ducks in a row before meeting with one? I'm afraid of how much I will be charged to begin with, let alone if I take up too much time asking questions that maybe I should already know. If I am preparing for keeping track of everything (since I have yet to charge someone, or buy anything that I don't already own), how can I bring in any numbers to show? All I really have right now are prices, some of which are arbitrary. The rest are merchandise and prints with prices I set on SmugMug which include sales tax. <br>

Anyway, since I don't know what I probably should know already, I am turning to the photo.net community. It's hard to know what questions to ask here, when I'm not sure what I need to know! </p>

 

<p>Tracie, Don't remind me.....ughhhhhh!<br>

I make copies of every check or invoice (income) and then add them up for CPA. I do the same for all photo related purchases. Make sure to include anything use use for the business. I even include paper clips, masking tape (hanging flyers at events), batteries, CDs, CD cases, mailing envelopes,postage, pens, any business meals or motel rooms, business license, advertising (smugmug, web site domain, and business cards) Percentage of home used for office space (utility bills) ALL PHOTO GEAR AND COMPUTERS:) plus accessories. Once you get started you will want to include your quarterly IRS payments. Also your CPA's fee. The list goes on and on according to your type of work.<br>

So you make a list of all your expenses also. My CPA likes me to separate office supplies & advertising from other expenses like photo gear, batteries etc..<br>

I also write down date, event and miles for every event I shoot. Those miles really add up! I also give him my home insurance and land tax amount since I work out of my home. I guess most people do that? I would call around and get quotes. Ask CPA how much less it will be if you do all the work for him/her by having your income and expenses in some kind of prepared order compared to bringing him a bag of paperwork to sort. I went to a large firm and they told me it would be under $100.00 but when I went to pick up my taxes the CPA was conveniently out to lunch and price jumped to $150.00. Ripoff. This was back when I hardly had any expenses and profits. I went to the IRS free tax preparers at first (VITA) http://www.irs.gov/individuals/article/0,,id=107626,00.html but then it became too complicated for them to do it for free. So I asked if any of them did taxes on the side and one said yes. He has done mine for $75.00 the last 2 years but I have all the work pretty much done for him. He uses some software and probably does it in less then a half hour. Be careful. You want someone that knows what they are doing. I think I heard someone say the other day that H&R Block starts out around $175 but not sure how detailed that kind of tax was. They really messed up my dad's taxes about 15 years ago so I would not recommend them.<br>

I am in FL. and after 5 years just found out that we also have sales tax (not State Tax)....but only on items or services sold in FL, so all the CDs I send to people out of state and sales from Smugmug are not taxed by FL. But of course you owe IRS taxes on those sales. Check with your state for their laws. FL. should of told me when I got my business licensee but they were not doing this. They sent out amnesty letters to many of us this year that they forgot to inform about the sales tax. How were we supposed to know if thy don't tell us?<br>

I hope I helped a little. I am awful with book-keeping so I am sure you will get better advice then I have shared with you. Just thought I would give you some tips that may help. Good luck....</p>

<p>You should be able to find some basic accounting courses at a nearby college to understand the mechanics of the process. I think seeing an accountant should be pretty high on your priorities - most accountants should have a free 'introductory' meeting so they can understand you and you have a chance to see if you want to work with them; they will be used to seeing business newbies and you could take the opportunity to ask what are the key parts you need to present each year. How far they will go in offering this advice before they charge you for professional services is open to question.</p>

<p>There are some pretty decent accounting programs such as Sage Accounting, Quickbooks and probably a whole host of others, but many people just use a spreadsheet. The program packages are often designed to present the information in a way that an accountant finds easier to read and this can drastically reduce the costs of end-of-year review. Some of them are also designed that you can just post the report to the taxman as they are.<br>

I don't know about the US but here in the UK one of the biggest problems people run into is the taxman and not knowing their tax status. If you get it wrong you can end up with a humungus tax bill at the end of the year which can really bugger up your cashflow. But get it right and you not only get an easy ride but you can also offset a far bit against tax losses (such as depreciation of capital equipment).</p>

Quickbooks is a good way to keep track of your records. The reports you generate can be given to your accountant. Mike has said it best. Good Luck

I ran my business on Quickbooks. Each year, as Carol said, I handed the accountant a direct set of printouts from QB for my taxes. You must understand that QB is only as good as your posting. I found it has to be updated at least weekly. I had a business credit card and made sure my QB was up to date with the card and that I did all my photo business on that card. If you actually stay up with QB you will know whether or not you are making or losing money and have all your financial documents automatically updated. It, for me, was not that difficult. I hated the continual posting but its like wedding pictures for clients once you fall behind it's hell.

<p>Have you registered your business with the State and gotten a Sales Tax ID? You probably need this to collect sales tax on taxable products and services.<br>

You may have to file quarterly sales tax reports with the State as well.<br>

Check your State Dept of Revenue webpage for details or check with an accountant or another photographer who has been in business a while regarding this.<br>

Some states have funky laws as to what types of services are taxable or not. If you are selling product (say prints) for resale (through a gallery/vendor) then those sales may not be taxable (as they would collect the sales tax in their transaction) - Sale for resale.</p>

 

I don't use QB anymore because my accounting got so convoluted, but I did have a company that used QB. They make an accountant's version that can read your files, making the transmittal of your accounting info seamless. We simply entered all the info, and ran reports. It was very neat. I would start by talking to a few accountants to see what they offer and recommend, and probably zero in on one that can offer this kind of QB solution. I've also used MS' accounting, and it is also very good.

<p>You don't need to have all your ducks in a row before seeing your accountant. In fact, the first meeting with your accountant will be for the purpose of identifying all your ducks and learning how to line them up. See the accountant soonest. </p>

<p>Budget $2,000 for your accountant in the first year. After that it will be less expensive, but in the first year, your accountant will help you with corporate formation and can design your Quickbooks setup and walk you through how to use it and what the parts mean, and of course the accountant will do your taxes (as in subsequent years). </p>

<p>It's tough to swallow the first year's accounting bills, but they save you money and sweat in the long run -- one of the best investments in your business that you'll ever make, in my experience.</p>

<p>Thanks everyone! It looks like I will be scheduling a hopefully free consultation with an accountant first. Then maybe getting QuickBooks to keep up with everything.<br>

I am a little concerned with how much an accountant will know about this industry and how photography services and sales are taxed in WA. WA seems to have some odd taxing going on! I want to make sure I'm paying everything I need to. Is there a resource for finding photographer specific accountants by chance? I was considering joining ASMP to see if they could guide me to an accountant... and lawyer for that matter. <br>

Thanks again for the great advice so far!</p>

 

<p>Tracie.. I came across this article today. It was in last Sunday's USA's Weekend magazine.<br>

<strong>How to choose a tax preparer</strong><br>

More than 60% of Americans pay someone to prepare their tax returns, and with good reason. It's a complicated, time-consuming, sometimes messy task, and there's not a lot of room for error.<br>

But finding a competent preparer can be unnerving. Currently, anyone can prepare tax returns for a fee — and a lot of people do. Some are reputable professionals. Others use the lure of low-cost tax preparation to promote dubious products. And still others are flat-out crooks.<br>

Last year, the IRS announced plans to require all paid tax preparers to register with the government, pass a basic competency test and take continuing education courses. Starting this year, anyone who prepares tax returns for a fee will be required to obtain a Preparer Tax Identification Number from the IRS, so make sure the person who prepares your return has fulfilled that requirement.<br>

Other tips for choosing a tax preparer before the April 18 filing deadline:<br>

<strong>Avoid big talkers.</strong> Beware preparers who claim they'll get you a bigger refund than their competitors can. A preparer can't estimate your refund without reviewing your financial information. And don't do business with anyone who bases his fee on a percentage of your refund. "That's illegal," says Cindy Hockenberry of the National Association of Tax Professionals.<br>

<strong>I found this interesting:-) >>>>>Likewise, steer clear of anyone who won't discuss fees in advance</strong>, says Edward Karl, vice president of taxation for the American Institute of Certified Public Accountants. Some preparers may not be able to provide an exact amount until they see your return, but they should be able to give a range or explain how fees are calculated.<br>

<strong>You'll need receipts. </strong>Avoid preparers who say they don't need to see receipts to estimate your charitable contributions or other deductions. "You need to have a receipt for every single dollar you contribute," Hockenberry says. "If the preparer doesn't ask good questions, you might want to gather your belongings and see someone else."<br>

<strong>Check credentials.</strong> Certified public accountants, enrolled agents and attorneys are required to fulfill education and licensing requirements and are bound by ethical standards. They're also authorized to represent taxpayers before the IRS in all matters, including audits, collections and appeals. That doesn't mean you should automatically rule out a preparer who doesn't hold one of these designations, Hockenberry says. Find out how long the preparer has been preparing tax returns and whether he or she belongs to a professional organization that has continuing education requirements. And don't be afraid to ask for references, Karl says.<br>

<strong>Look for stability.</strong> Make sure the preparer will be around after April. If the IRS has questions about your return, you'll want to be able to get in touch with him or her.<br>

Finally, if you're single, have no dependents and claim the standard deduction, consider doing your own taxes. Tax software providers such as TurboTax and H&R Block offer low-cost online tax preparation programs for taxpayers who file a 1040EZ. Taxpayers who meet income requirements can prepare and file their returns free online through the IRS Free File program.<br>

For more information, visit <a href="http://www.irs.gov/">irs.gov</a>.<br>

http://www.usaweekend.com/article/20110218/MONEY/102200306/How-to-choose-a-tax-preparer</p>

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<p>Thanks John. I will keep this in mind when looking for one.</p>

<p>John, I am in FL also and have been looking into hiring a CPA as I just got started as well. So by services, are we to charge sales tax on session fee's?<br>

Also, In the process of making everything official . . . do you understand the tax differences between Corporate, LLC, etc? Which one might be better for a home based photography business? <br>

Thanks for the info!</p>

<p> </p>

<p>Belinda, that could be a gray area. For over 90% of my family portraits I deal with people on vacation from out of state. I send the cd to another state. My guess is if I sold them the cd while they were here in FL. while on vacation then I would probably owe sales tax. I would say be creative in how you charge for session. If you sell the photos online through a service like Smugmug then again you don't owe taxes. If you don't have a website like Smugmug, then write me and I will fill you in. Great company and saves you lots of paperwork and headaches. Sell your prints and other photo products that they offer and let them do all the work. They also give small discount for referrals to me when I send them a new customer and to the new customer. Every dollar helps. My referral # is fd0V82DyzX4lw. My Smugmug website is http://www.johnhillphotography.com/ I have left mine very plain and simple but it works. You can customize them very fancy. I am shooting a Mardi Gras parade tomorrow and will be posting the photos on the site and hope to sell a few:)<br>

I think if you sell customers prints that you made but send to out of state then again you don't owe sales tax but this is another question to ask Florida Department of Revenue.<br>

Ask about getting an Annual Resale Certificate. With this you can save money on frames, cds and whatever you plan to <strong>resell</strong>. http://dor.myflorida.com/dor/taxes/resale_faq.html <br>

You need to call or visit your local Florida Department of Revenue office. http://dor.myflorida.com/dor/ I was much happier with answers from local office then the main toll free number. The toll free number workers were not nearly as helpful.<br>

No, I don't know much about Corporate, LLC, etc. I think it cost more to be Corporate or LLC but I think someone mentioned that if your an LLC and get sued then just your business get's sued. I am just guessing on that one. Need to get more info here from one of the photographers that knows more about business then myself or better yet, from a CPA. I am a very small business.</p>

 

<p>One thing to look into is something called "SCORE", you can find links to your local offices on the Small Business Administrations website. This is a volunteer based organization made up of a variety of business professionals. They offer a variety of services and seminars, many are free. If you are just starting out you can take your business plan to their office and they will review it with you and give you pointers on where the holes are or things you need to look at. They have a number of financial spreadsheets that you can download for free for starting a new business, well worth the time to look at. Hope this helps.</p>

<p>David, thanks for directing me to the spreadsheets. I didn't notice those when I was browsing SCORE before. </p>

<p>Tracie,<br>

It's probably best to have your accountant help you with the initial setup of Quickbooks as he/she is the one who will ultimately be using the information. You certainly don't want to have to re-enter information to make things easier for your accountant. Remember, the easier it is for the accountant, the fewer billable hours...-TED :-)</p>

<p>I was an accountant for almost 30 years. I'm not a CPA. I'm exactly the person you would call to get you set up on Quickbooks and show you how to enter your information correctly so you can track your income and expenses by type of service as well as by big jobs, such as weddings or ongoing projects. At the end of the year I would come in, enter anything that's missing, reconcile the books for the year and have a nice tidy package of financial statements and other helpful information for you to turn over to your CPA. Plus I'd go over the information with you and answer any questions you have.</p>

<p>CPA's hate bookkeeping which is why most of them won't do it and why they usually aren't all that great at using accounting software like Quickbooks. Your CPA will be only too happy to recommend someone like me who can do all the stuff the CPA would rather not do. That's a GOOD thing because then you're not paying CPA rates for work that a non-CPA can do. If you go to http://proadvisor.intuit.com/accountant-match/?_requestid=153578 you can look up Quickbooks Pro Advisors in your area. Try to find an accountant as opposed to a bookkeeper. An accountant understands how each entry is going to impact the final financial statements and can reconcile the financials. Once everything is set up correctly and running smoothly, then you can hire a bookkeeper for data entry if you want. It's way cheaper to have the books set up correctly from the get-go than it is to pay someone like me to come in and unsnarl it later.</p>

<p>I recommend that you use Quickbooks. Don't let anyone, not even your CPA, talk you into some crappy program like Peachtree. (CPA's aren't that great at bookkeeping, remember?) Quickbooks is user-friendly and there are about 50 kabillion bookkeepers/accountants out there that use it so you can always find someone who knows it.</p>

<p>You don't need to have your ducks in a row before speaking with an accountant so there's no need to bring in any numbers. An accountant will ask a lot of questions in order to form an understanding of your business. He/she expects that the accounting stuff is probably all new to you and will tell you what information s/he needs. As soon as the accountant starts working on your books, all the pieces will start to fall into place so if you forget to mention something, don't worry too much about it. The accountant is bound to come across it.</p>

<p>One last thought - programs like Quickbooks are great for recording business activity in a standard format that you need to manage your business and also need for your tax return. However, to effectively manage a business you often need to see financial information in some other format. For example, tracking and projecting cash flow might be of a lot more use to you right now than seeing your financial statements at the end of the year. An accountant can help you with that, too.</p>

<p>Tracie, please back up your documents, take it from someone who learned the hard way.<br>

It's bookkeeping 101, I still use a ledger and a pen, broken down in sections income, miles, postage,printing, and every penny that is spent in and out, it's not as hard as it sounds. Enter daily or while it's fresh in your mind.<br>

At tax time I make a small spread sheet of all of the above.<br>

Find a good accountant, if they do taxes, that's a bonus.</p>

<p>As both an accountant and a photographer I would like to remind you to register your company with your state and file for a sales tax ID. I would also recommend Quick Books as a very friendly user program. I believe there is a sample photography set of accounts you can import and use right from the start. If you're not familiar with bookkeeping you can go directly to the checkbook and record your checks and deposits. There will be a drop down box to select expense and income accounts to allocate each check or deposit to. You won't need to learn GJ entry. <br>

Also keep in mind that each county within your state has its own sales tax rate. It's wise to download the rates if you plan to travel throughout the state. <br>

Finally, in case you are not aware you will be paying around 15% tax to cover social security and medicare taxes on earning. Normally an employer covers half of that but as a sole proprietor you are responsible for the total tax. Beyond that you will be responsible for both federal and state income taxes. <br>

Photography is an exciting career - just remember to keep the funds set aside to cover your taxes so it doesn't become a headache. After your first year, depending on profits, you will need to pay quarterly tax deposits to both the federal and state governments.<br>

I wish you a long, successful career.</p>